GeneDx Holdings Corp. (WGS) Q3 2026 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the GeneDx Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please be advised that today's call is being recorded. I would now like to hand it over to our first speaker, Sabrina Dunbar, Investor Relations. Please go ahead.

Thank you, operator, and thank you, everyone, for joining us today. On the call, we have Katherine Stueland, Chief Executive Officer; Kevin Feeley, Chief Financial Officer; and Mark Gardner, President. Earlier today, GeneDx released financial results for the third quarter ended September 30, 2026. Before we begin, please take note of our cautionary statement. We may make forward-looking statements on today's call, including about our business plans, 2026 guidance and outlook. Forward-looking statements inherently involve risks and uncertainties and only reflect our view as of today, November 9, and we are under no obligation to update. When discussing our results, we refer to non-GAAP measures, which exclude certain items from reported results. Please refer to our third quarter 2026 earnings release and slides available at ir.genedx.com for definitions and reconciliations of non-GAAP measures and additional information regarding our results. Additionally, please refer to our most recent annual and quarterly filings with the SEC for a discussion of factors that could cause actual results to materially differ from forward-looking statements. With that, I'll turn the call over to Katherine.

Thanks, Sabrina, and good afternoon, everyone. Our Q3 results reflect profitable execution in a growing market. As we first shared in May, we've organized our business around 3 key imperatives, and in Q3, we made concerted progress on each of them. First and foremost, optimizing unit economics, second, growing utilization, and third, delivering leading products at unmatched scale, all while managing capital responsibly. Today, I'll discuss the highlights of our quarter. Mark will provide a deeper dive on our RCM and commercial initiatives, and Kevin will walk us through the financials. In the third quarter, we reported $123.1 million in total revenue, expanded adjusted gross margin to 72%, generated adjusted net income of $8.6 million, and resulted over 32,100 exome and genome tests. In Q2, we shared that RCM was our number one priority, and we're pleased with the progress we saw here. Our average reimbursement rate increased approximately 5% sequentially, reflecting both improved genome collections and mix shift into our exome line. As we prioritize profitable growth, we are raising gross margin and net income guidance and reaffirming our full-year total revenue guidance. To that end, in Q3, we aligned genome testing workflows to collect more payer-required documentation before testing begins in the lab. We evaluated the potential effects on ARR, volume, and total revenue and deliberately prioritized a more sustainable path to payment, leading to a sequential step-up in ARR. As we implement these processes and educate clinicians on payer requirements, we are adjusting our volume expectations to give these workflows more time to mature. As a market leader, we are building a better model, one that prioritizes profitable growth, thus enabling us to reinvest into our patients, our products, and our operations in a self-sustaining way. Part of that model is working closely with payers and governments to ensure equitable, sustainable access to whole exome and genome testing. To support those efforts, I am excited to welcome Nicole Maassen as Chief Patient Access Officer. Nicole was a pivotal force in transforming the market access strategy during her time at Exact Sciences, and as part of our team, she will advance our payer partnerships, build upon our government relations efforts, and help translate positive coverage policies into timely access for children who need testing. Demand is strong. We saw growth across all markets in Q3 as clinicians continue to choose GeneDx for our reliability, quality, and customer experience. This quarter, we made genomic testing easier to adopt with new ordering features, simplified reports, and post-test guides. These enhancements, together with expanded EHR capabilities, support broader adoption of exome and genome across care settings. We also advanced product innovation in the quarter. We continue to believe genome sequencing will become the standard for diagnosing heritable disease, and our ambition is clear: to consistently deliver the number one genome on the market. We recently announced the inclusion of long-read sequencing as part of our genome portfolio, and we expect to continue rolling out new technologies over the coming quarters. Our underlying data asset, GeneDx Infinity, underpins many of our competitive advantages in the exome and genome testing markets, but its value also extends beyond our core diagnostics business. Our biopharma and data business grew for the second consecutive quarter, with Mirum Pharmaceuticals and Beren Therapeutics joining our portfolio of sponsored testing partners. In tandem, we are seeing increasing interest from AI and ML and technology players in how our data can advance drug discovery and precision medicine. This is our long-term value proposition coming to life. As we diagnose more patients, we improve our interpretation capabilities, turn diagnoses into therapeutic breakthroughs, and unlock new avenues for growth and patient impact. With that, I will pass the call over to Mark.

Thank you, Katherine, and good afternoon, everyone. Our remarks today will focus on collections and commercial execution. A genetic test that ends the diagnostic odyssey has real value, and we're intent on getting paid for the value we deliver. Sadly, it has been a common practice of the lab services industry to perform testing in as frictionless a way as possible, to grow volume without regard for whether a test will be paid for or not. We are committed to defending this value for the long term. Our commitments to our patients, clinicians, and shareholders are too important to perpetuate these volume-at-all-cost tactics, particularly because we're in the early stages of penetrating this growing market. The opportunity I saw when I joined GeneDx remains clear. We have strong demand and differentiated clinical capabilities. Now we must match those strengths with more consistent operational execution to convert unexplained symptoms into orders more consistently, move orders into actionable reports more efficiently, and turn reports into reimbursement more effectively. We started a multi-year revenue cycle transformation. We're in the early stages, but we improved all three of the key metrics that we shared last quarter. Kevin will walk through those details in a moment, but we expect most improvements to impact 2027 and beyond as we continue to tackle our list of RCM initiatives and progress towards collection rates in line with industry norms. We deeply interrogated the root causes of our exome and genome denials, and we found that 62% of them were administrative and procedural in nature. These are addressable with time, effort, and execution, and this is where our team is dedicating most of our immediate efforts. The remaining 38% relate to subjective clinical necessity disputes or to patients who are not covered by payer policies, and we'll address this group over time. One of the most impactful actions we can take to improve our collection rate is to collect better documentation upfront. As Katherine shared, in Q3, we aligned genome testing workflows to collect more payer-required documentation before testing begins in the lab. Collecting documentation upfront can extend the time between accession and the start of testing, as indicated by accessions growing 28%, while reported volume grew 25% in the quarter. That friction resulted in higher rates of order cancellations, downgrades, and delayed starts. While that creates a near-term headwind to reported volume, we believe that this is the right approach to support durable revenue growth and expect these requirements to become easier for clinicians to navigate as we implement additional AI and technology tools into our RCM processes. Next, let me speak to how our commercial strategy is enabling us to keep driving demand across core and emerging call points. Our core markets of geneticists and pediatric neurologists delivered strong growth in the quarter, primarily through increased productivity per clinician. We remain the market leader in these segments, and we continue to invest significantly in product development, key opinion leader collaborations, and electronic medical record connectivity to deepen our relationships with these customers. In our emerging markets, we are seeing our commercial investments from early in the year come to fruition. Importantly, the general pediatrician segment is poised to drive greater unit volume growth in 2027 than all other segments. The GenPeds team entered the field in February, and following two quarters of ramp-up, they're already paying for themselves. Clinicians are placing repeat orders and sharing positive feedback on our enhanced customer ordering experience, and both of these give us confidence moving forward. Lastly, I want to go deeper on something Katherine already referenced, which is the value of GeneDx Infinity for building durable competitive differentiation. Many rare pediatric diseases are caused by de novo variants, which arise in the child and are not inherited from either parent. These variants are often seen in only a handful of patients worldwide, and they rarely appear in published literature. The only way to interpret them is with experience, and GeneDx has sequenced more of these variants than anyone else by an order of magnitude. As we add technologies like long-read sequencing to our portfolio, we can both measure more variants but also expertly match one patient's genetic and clinical profile with another's, thus confirming a genetic diagnosis. That matching exercise is unique, it is cumulative, and it compounds over time. I'll now pass it to Kevin to walk through our financial results.

Thanks, Mark, and good afternoon, everyone. Third quarter 2026 total revenues were $123.1 million, inclusive of $110.4 million of exome genome revenues, which is up $10 million sequentially. This sequential growth is the right frame for evaluating our trajectory, with continued growth and financial improvement. Adjusted gross margin expanded from 69% in Q1 to 70% in Q2 and 72% in Q3, and adjusted net income improved from an $8.2 million loss in Q1 to near break-even in Q2 to $8.6 million this quarter, two consecutive quarters of improvement with more to come. Our blended average reimbursement rate in the third quarter was $3,436, up 5% from $3,258 in the second quarter. We're guiding to another step up in Q4, and we believe the trajectory continues from there as our revenue cycle work matures. Last quarter, we shared key metrics across mix, coverage, and collection rate to track our ARR progress. Prior to walking through those, I'll just note that underlying like-for-like contract rates were relatively unchanged during the quarter. First on mix, within the portfolio, 92% of volume was outpatient insurance-based, with Medicaid, our largest payer segment, at 48%. Genome was 26% of outpatient insurance-based volume, down from 32% in Q2. This was purposeful mix management in the near term. While genome now carries a higher collection rate percentage, the average contracted rate and average reimbursement rate for exome is higher, so a shift between the two impacts our blended ARR. To be clear, the goal is not to minimize genome utilization. It is to find the right product fit for the right circumstance. As future product enhancements launch, we expect genome mix to rise again concurrently with our ability to improve unit economics. Notably, genome cost per test has come down 43% from last year, and that's a downward trajectory expected to continue. That said, genome COGS is still significantly higher than that of exome, and Mark's team has further validated our path to reduce genome cost per test by at least a few hundred dollars over the next several quarters. Two levers give us conviction here. The first, reagents, which is the gap between genome and exome. At this point, it makes up more than half of all COGS. Sequencing economics continue to improve across the industry, and as our volume scale, we expect to capture materially lower wet side input costs. Second, applying AI and ML to various dry side steps remains one of the most significant and largely untapped efficiency opportunities in this business. We're making real progress here, but expect it to be a more meaningful contributor to cost reduction in 2027 and beyond. Second, payer coverage has stayed relatively flat this quarter, with positive exome policies in place for 98% of commercial lives and positive genome coverage in place for 88%. Carelon expanded policy to approximately 56 million lives in June, and coverage expansion is beginning to show early signs of improved collections. Medicaid covers exome in 37 states and genome in 25, up from 23 states in Q2. Uplift impact in the near term from any policy change is gradual, as payers often, and sometimes intentionally, are slow to operationalize changes, but improved coverage is an important foundational catalyst for 2027 and beyond. Approximately 82% of our outpatient genome volume was submitted to payers with an active positive coverage policy, up from 67% last quarter, primarily a reflection of commercial plans following Carelon. As Mark described, where we see clear line of sight to improve performance is in matching to payer-by-payer specific criteria to benefit from the enhanced coverage. Finally, our underlying outpatient genome collection rate was 36% in Q3, up 400 basis points from 32% last quarter. We attribute that improvement to the nascent RCM workflows we put in place. What is most encouraging is that this improvement has happened without the AI-enabled payer-specific transformation we have planned, which is still being developed and implemented. The exome collection rate's approximately 32%, flat with Q2. Genome is our primary focus today, given its place in our future and the overall strength of exome's margin profile. Exome will be the next phase of our RCM work, and every point of improvement there supports faster growth. What makes all three of these levers scalable is the AI and technology transformation underway in our RCM stack. The transformation's progressing well, with strong leadership now in place. Think of Q2 as interrogating our RCM processes with third-party experts, Q3 as new leaders validating the plan and designing the future architecture, and Q4 and early 2027 as implementation and pull-through. Now, turning to guidance. As we prioritize profitable growth, we're raising full-year adjusted gross margin guidance to approximately 71% and adjusted net income guidance to at least $12 million, and reaffirming full-year revenue guidance of $475 million-$490 million. We expect revenue within that range, but at the low end. We are adjusting full-year exome and genome volume to at least 28%, and as a result, exome and genome revenue growth to at least 17%. For the fourth quarter, we expect ARR to improve to approximately $3,500 a test, adjusted gross margin of at least 71%, adjusted net income of approximately $12 million, total revenue of at least $135 million, and exome and genome revenue of $121 million on result volume of 34,500 tests. While we are not providing fiscal 2027 guidance on this call, I will address PAMA and put our exposure into context. Approximately 85% of total revenue is insurance-based. Within our insurance-based business, a little more than half of our contracts are tied to a percentage of the Clinical Lab Fee Schedule, or CLFS. Those rates move with CLFS and carry direct PAMA exposure. A little less than 1/2 has separately negotiated discrete fee schedules that are insulated from PAMA. Those contracts typically renew in a 1-to-3-year cycle, and we have good visibility into their stability. So with approximately 45% of our revenue subject to PAMA, we expect a mid-single-digit headwind to total 2027 revenue. I will underscore that improving revenue cycle collections and reducing COGS remain substantially larger opportunities for the business. The RCM tailwind in 2027 can more than offset PAMA in the year ahead, and improving collection rates and mix management mean that year-over-year ARR and revenue comparisons become progressively more favorable as we move through 2027. The business is performing better each quarter in revenue, margins, net income, and in the leading indicators that drive those results, and we expect that trajectory to continue. Aside from Q1's typical seasonality, a similar stacking of sequential revenue on top of today's base is expected in 2027, particularly as improved collections converge revenue and volume growth rates in 2027 and beyond. And with that, I will turn it back to Katherine.

Thank you, Kevin. Every day, families are waiting for answers that already exist in their DNA. Our responsibility is to make those answers accessible to everyone who needs them while building a scalable, profitable business that can make an impact for generations to come. Our third quarter results reinforce that we are delivering on both. Thank you to our customers, our team members, and our shareholders for helping us realize our mission. And with that, operator, please open the line for questions.

[Operator Instructions] Our first question will come from the line of Dan Brennan from TD Cowen.

Maybe to start off, Kevin, I think you mentioned at the end of the call, thinking about 2027, you thought about sequential volume growth this year as a good proxy. Can you just unpack that a little bit? So your fourth quarter guide is 7% up, Q3 was 4% up, and we can calculate the first half. But just walk us through how you are thinking about at this early stage what the volume outlook looks like for 2027.

Yes. Look, on 2027, our long-term market opportunity and view of our place in it remain unchanged. On today's call, not going to lay out all of the components of 2027 until we have a fuller picture following Q4. But I think I laid out overall, we expect a positive trajectory to end this year and enter into 2027.

Okay. Then maybe just on all the RCM initiatives, Katherine, I know you mentioned in the prepared remarks how part of the reason for the volume guide-down was maybe these policies you are putting in place to get paid more. How do we put in place maybe that aspect of volumes decelerating a bit while you fix this payment rate? But as we look ahead, how long does it take to fix that to see what volumes could be, I guess is a question. Is there a way to toggle that a little bit? I guess would be my first question. Then maybe the second question would be, you mentioned pediatric volumes next year could be bigger than the entire, all the other segments. Maybe can you unpack that comment a little bit as well?

Certainly. I will kick it off and then invite Mark to comment further. First, just to reiterate, demand was strong. So, we saw 28% volume growth. So, samples coming in the door strong. We continue to see really, really good response from all of the customer segments that we are operating in today while we implement the RCM transformation. So, I think we are feeling very confident about the state of demand. And while we are in a growing market today, we are confident that we are going to continue to be the market leader of a much bigger market, which is what we are talking about in terms of the GenPeds opportunity that we first entered into earlier this year.

Yes. And just to add on to that, with regard to the 28% versus 25%, I think that, that is somewhat of a kind of a temporary issue in that we are asking people to do some more paperwork upfront that in turn elongates the total time between an order and when we actually issue a report. That is a few days, and that basically represents the majority of that delta between 28% and 25%. And then with regard to GenPeds, perhaps just to clarify that, we do not think it is going to be larger than all other segments combined, but we think that of the segments that we have, it will represent the largest single segment of those. So it is very robust, and as we said, it is already paying for itself. So we feel like it is very high contribution margin. It is a great channel for us.

And our next question will come from the line of David Westenberg from Piper Sandler.

I wanted to follow on to some of that question around documentation. Can you give us a flavor of what kind of percentage or some sort of magnitude on how much volume you might have lost because of documentation that you are now requiring prior to?

Well, I don't think that we've lost the volume as much as we've delayed the volume by a few days. If you just extend the total time it takes from when somebody expresses the desire to order to when they actually get a report, that actually represents the majority of that. So we don't think that the volume's actually lost. There are occasions when sometimes somebody will cancel the order because they say, well, I'd rather get exactly what I was looking for, and I don't want to fill out the paperwork. We would argue that in many cases, that's not necessarily great volume because we're unlikely to actually get paid for it.

One way to quantify that, David, but to look at the metric we introduced around accession growth, which grew 28% year over year this quarter, representative of demand outpacing throughput in that regard.

Perfect. I am at an airport, so I am just trying to can't ask my question as much as well as I'd like. In terms of the new market initiatives, newborns, pediatrics, different kinds of conditions, what are performing better than your expectation, and what are some of those that are performing maybe a little bit under the expectation? One thing to hit on, it was from a couple quarters ago, but how's trio testing going this quarter, or how did it go?

I will lead it off and then invite Mark and Kevin as well. So growth across all of the markets is going overall the way that we had hoped. I think we placed a big bet with GenPeds this year, and we are really pleased, as Mark just said, to see how much productivity there is there. Again, these families go on a five-year diagnostic odyssey. Being able to catch them earlier is not only better for clinical outcomes for these kids, but it is a better health economic story. So I think overall, we are really pleased with the demand that we are seeing across these different channels, and the fact that all of these channels represent large and growing markets for us to continue to lead the way to develop.

I would simply comment that there are different levels of market maturity by each of those segments. Obviously, there have been a number of champions and pioneers in the NICU space, but even there, only about 5% of kids in that space are sequenced today. We think that, that could be much higher. For each of these, there is an element of how much market development is really required, and I would say that we are actually pleased with all of them. There are different levers for each, but I think they are all actually in line with expectations.

Dave, just to follow on the comment around trios, we have seen trios relatively flat quarter-over-quarter in terms of mix, and have seen that rate of trios capturing mom and dad as comparators reverting back to historic norms following earlier in the year. As we launch into new markets, there is just a level of acumen building and education around the importance of that with physicians and with families, but we have seen that level out this past quarter.

[Operator Instructions] Next question will come from the line of Tycho Peterson from Jefferies.

Maybe just a question on visibility. Just thinking that you gave guidance in August, I am wondering kind of just on the volume side, I understand all the revenue cycle initiatives here, but what has changed materially, I guess, in the last couple months from your perspective as you have gotten in there and looked a little bit deeper?

Yes. I mean, recall in the prepared remarks, Q2 really diagnosing the fix with some third-party experts, and it was just this third quarter here that we filled out the ranks with some new leadership across revenue cycle, access, market access, and finance. They have really validated the plan that we had in place, and these are some folks with proven track records effectuating a multi-year revenue cycle transformation at much larger companies and larger scale. And so good to see them reaffirm that plan, and with that, as we discussed, we are seeing demand outpace throughput because of some of the pre-analytical controls around documentation, and that has led us to refine the volume outlook. But in terms of demand signals meeting expectations throughout the year, we have just got to move those through the process more effectively and efficiently moving forward. I would just add, as we zoom out and look at 2026, we are kind of undergoing several transformations at once. One, we invested heavily in the commercial expansion and entering new markets. Two, we are introducing new products this year. Then three, we have the revenue cycle management transformation that we have now introduced mid-year. So, we are learning a lot as we are continuing to drive the company forward, and we are putting a premium on paid volume as the goal rather than volume at all costs, because we know that it offers us a lot of important leverage to be able to have a self-sustaining business.

Okay, that's helpful. Kevin, is the message on PAMA, I appreciate you quantifying it, mid-single digit headwind, is the message you are trying to convey that you will be able to offset? I just did not quite understand how you were trying to position that.

Yes, expect the improvements in collection rate through the revenue cycle work to offset or more than offset the effects of PAMA, then later on, of course, growth on top of that, with a return in 2027 to see the revenue growth rate converge much closer to what we would expect as a continued high volume growth rate. So yes, hopefully the color we gave appropriately contextualizes. The PAMA exposure is a subset of a subset of the business.

Okay, that's helpful. Last one, just how are you thinking about long-read, just sizing that opportunity and how material that could be?

Tycho, I will take that. Look, we think that long-read is an important addition to ending the diagnostic odyssey for so many of these families, and so we are excited that we are going to be launching that this year. We just launched an early access program, and we are working with key opinion leaders on really developing the right criteria for when to deploy this technology.

[Operator Instructions] Next question will come from the line of Bill Bonello from Craig-Hallum.

I am really just trying to come at some of these things a little bit different. I guess what I am trying to figure out here is, as you have done all this revenue cycle management work, have you sort of discovered or do you believe that there is a portion of the orders that you were getting that no matter how well you filled out the claim or followed up on denials, they just were not reimbursable? In other words, that the breadth of ordering had sort of expanded beyond the coverage policy? Because it feels like some of the improvement in ASP that we are seeing is simply that you are not billing for some of the tests that you, in the past, would have billed for but collected zero on. Help me kind of connect there.

Yes, I would just say that to the point of the 62% versus 38%, we think the 62% is just execution. That is the stuff where it is like, we fill out the paperwork right, we are going to get paid. The 38%, we are not giving up on, because in a lot of cases, we feel like, hey, these patients should have been sequenced, but maybe the policies do not indicate that they fit the particular payer's definition of medical necessity at this point, or maybe they have no coverage whatsoever. So, we do feel like there is a certain percentage of folks that we have been running the tests on where no matter how well we administratively do it, that we were not actually going to get reimbursed for it. And we are committed to finding ways to make it so that those patients are served. We think that is a justice issue, and we should continue to work that. But the majority of the opportunity is still mostly administrative in its nature.

Okay. Then maybe just as my one follow-up, if you look at the difference between the requisitions or accessions, whatever you want to call them, that came in and the volume you performed, what percent of the volume that came in as demand do you think you will ultimately perform? Is that 3% differential? You talked about it being a time delay, but how should we think that all of those tests will eventually be performed? If so, don't we sort of catch up somewhere on the volume?

Yes, substantially all. That 3% delta is significantly higher than how we have ever operated before, now introducing effectively some process to go slow to eventually move fast down the road. So, yes, would expect them ultimately to pull through. Won't happen in one quarter per se, but over time as we effectuate the revenue cycle work, which includes speeding up the process to move through those pre-analytical procedures and collect documentation more electronically, we will see that differential compress over time and eventually get back to a stable situation where they are matched to each other.

So, you anticipate submitting claims for most of the differential?

Yes.

[Operator Instructions] Next question will come from the line of Mark Massaro from BTIG.

The ASPs came in above our expectations this quarter. I am wondering if you could speak to any impact that you might have realized from either Medi-Cal or Carelon. If not, can you just give us a sense for when you think those could kick in, if they are more of a 2027 impact?

Yes. If you look at the jump in just one quarter from 32% to 36% collected on genome, a portion of that was attributable to plans looking to Carelon's policy. So, we are seeing some good signals there. I would not call the improvement fully baked at this point. As I mentioned in the prepared remarks, we often see payers fairly slow to operationalize payer policy changes. So yes, in the third quarter, some of that 4% uplift is attributable to Carelon, a much smaller portion to Medi-Cal, who I would say at this point still remains a fairly arduous process to submit and be paid for. So, still working through some of the operational rigor in that regard, leaving it really to 2027 at this point as an expectation for that to kick in.

Okay, that's great. Then I'd be curious, I understand that the volume shortfall was likely a function of seeking more documentation upfront. However, this is a competitive marketplace, and other players in the space are starting with a genome first and long-read type strategy. So, I was just curious if you saw any competitive impact and how you're thinking about that going forward.

Yes. So this quarter, we haven't seen a particular change in competitive behavior. We're seeing all the same headlines that investors are seeing, and while there's a lot of noise there, we're still firmly the leader in this market. I think what we continue to battle is that the status quo, the standard of care today is the lack of utilization of testing, it's delaying a diagnosis, it's referring patients over many years, and it's changing that behavior that, frankly, is the most important lever for us as a company. We've proven that it's an attractive market. We actually think competition is going to help us change that status quo. So, our leadership today is growing in a growing number of markets, but we have our eyes set on a much larger market. Competition actually helps us unlock that much larger opportunity, and we intend to be the market leader of a much larger patient opportunity.

Awesome. Just one last one. Was curious if you could give us any traction in the prenatal market or the NICU, what you're seeing there. Any changes that perhaps you've made as you pursue those markets, and what your expectations are over the coming quarters in those markets?

Well, both those markets are actually growing faster than the overall company, so they're both emerging markets and are growing at a nice healthy rate. I would say that in the NICU, it's still mostly a question of programmatic execution. We see vast disparities in the level of the utilization of this testing from one hospital to another, and we're really focused on how do we document what's best practice and transfer that from one institution to another. In the prenatal space, this is one where the guidelines kind of lag where we think the market's going to go, so we're actively working on various forms of clinical evidence to improve the guidelines. There's still a lot of CMA testing being done as sort of the final frontier, and we think that there's dramatic improvements that can be made with exome and genome in that space. So, I think that as the guidelines get updated in the prenatal space, we think that, that could be a very large market.

Our next questioner on the conference line of Subbu Nambi from Guggenheim.

If we carry forward the growth of 28% in volumes this year to next, that is where consensus is right now. Kevin, is that the right way to think about volume growth in the near term, or has something changed your expectations as we close out 2026?

No. Look, our view of the market opportunity remains unchanged. I will comment more on 2027 once we get to that point, but as I think you have heard us say on this call, we see no slowdown of demand itself and look forward to another year of high growth ahead.

Okay. Separately for RCM, how has your progress looked in Medicaid volume versus commercial volume? Is your collection a little bit better with Medicaid volumes, or is your collection a little bit better with commercial? Mark , you have done this before. Did you not expect the transient volume softness? If not, what is different about these product offerings?

Maybe I will start, and then I will let Mark chime in on the second part there. Look, the reality is Medicaid itself, a split story. Frankly, in those states that have picked up Medicaid coverage and have gotten to the point of routinely operationalizing longstanding policies, we are seeing a collection rate higher than we see across the commercial landscape. Pretty clear medical necessity and documentation requirements, and then when you follow them, none of what I will call those trapdoor administrative denials that we often see at commercial plans. So, in the states that have enacted coverage, and once they get to a more mature spot, we are seeing a fairly robust collection rate. What brings down the overall denial rate in that population is just the states that have yet to enact coverage, and we are accepting samples in all 50 states.

And with regard to the knowledge of what these policy changes would have in terms of volume, we were very purposeful in terms of how we were setting up our genome sequencing to deliberately make it so that we were going to collect that paperwork. That was a purposeful choice for us to drive up ARR in the quarter.

But Mark, this was a purposeful choice even last quarter, right? That is why I am a little bit surprised. Why are we noticing the volume softness only this quarter? This should have been a known, or am I missing something?

I would say that the changes that we have made have been changes that we implemented really at the beginning of this quarter.

Our next question will come from the line of Keith Hinton from Freedom Capital Markets.

Great. Just two quick ones for me. Starting off with on the volume side of things, you mentioned some of the documentation headwinds. I am just curious if you are seeing that in any particular therapeutic areas more so than the other, or are you seeing that more with the legacy geneticists and ped neuros who have been doing this a long time, or are you seeing it more with those with less experience. Is foundational still on track to do in the high 20s this year in terms of volume growth? Then I have a follow-up.

Yes. Demand was strong, as I said, across all segments. But specifically in the genetics area, that is where the impact is in terms of documentation because they are the ones who are more likely going to be ordering a genome. So, it is predominantly isolated to that customer segment.

Okay. So fair to assume that maybe we are running a little bit below that high 20s for foundational?

Yes, I think that's fair to say. The other point that I'll make here is more important than clinician type, where we are seeing some divergence in that collection rate is in the way in which orders come through. Today, the super majority of our orders come in through our own physician portal. As you know, we're early in our days of implementing Epic Aura, and what we are seeing is improved document collection and therefore improved collection experience in the population of orders coming from electronic means, primarily Epic, and that spreads across all clinician types. As we further integrate with more hospital systems, which is certainly part of our plan, we expect a natural benefit in collection rate and the overall user experience in collecting upfront documentation in that regard.

Great. Lastly, in terms of thinking about next year and the sales force, you mentioned GenPeds seems to be doing quite well. The sales force is already paying for itself. I'm curious if you have expectations to add meaningfully to the sales force in 2027, either in GenPeds or in other areas.

So as we look back at 2026, one of our most important investments was in that commercial expansion. I think we're really pleased to see the productivity across all of the channels, but especially in a new channel this early. We think that, that's very validating. We're continuing to learn, and now having Mark on board for a few months as we get into 2027 planning, we're going to look at commercial optimization to see how we continue to support growth in that market.

Yes. I think we're going to be adding some heads. I don't know that we're going to be making anywhere near the size of investment that we made this year, largely because this year we obviously had the changes in the AAP guidelines that preceded it. Without something as significant as that, I think we're going to make incremental changes based on their return on investment.

And then the other, I think, important investment that we've made is making the ordering experience and the test report and next steps much more user-friendly for the non-expert. We think that, that's going to continue to be a driver of volume, customer acquisition, and will also ensure that we have the right documentation that we need to get paid. The customer experience that we're building, the investments that we're making in Epic Aura moving forward, all ensure that we can continue to have strong commercial performance in these markets.

Our next question will come from the line of Kyle Mikson from Canaccord Genuity.

The outpatient genome mix has declined quarter-over-quarter recently. I think it's at 26% now from 32% last quarter. I think it was like 40% earlier in the year. You're still committed to genome, though. I'm just curious, when do you try to increase the outpatient genome mix again? If that's, this is going to be tied to collection rate, what rate do you aim to kind of get back to emphasizing genome in that market and like, maybe tone down the reflex testing?

Yes, look, I think as genome mix begins to take share, we are confident we will be in a position where collection rates for genome and COGS for genome, collection rates will be higher and COGS will be lower. So, a much stronger unit economic position in terms of genome once share begins to grow back. As we said, our goal is not necessarily to maximize just for unit economics, but for the right fit in the clinic at the time. We have a number of offerings across the exome, reflex, and genome portfolio, we think, to give physicians the right choice for the right patient. But we remain convicted that ultimately, as genome begins to pick up more share again next year, we will be in a much stronger position at that point in terms of unit economics.

Okay. It sounds like you are continuing to lower the cost for genome tests, which is still pretty high relative to exome. Just confirm if the exome COGS have basically remained the same these past two quarters or years. On R&D, it declined quarter-over-quarter, materially. I am just curious if you are just trying to wind down some investment or something over there.

Yes. Exome, maybe not fully optimized, but near it at this point. As I said on the call, the biggest gap between the two products at this point is just the input cost in terms of reagents themselves. All to say that the dry side steps at near parity for us between exome and genome, and I am not sure that all others could say the same. So exome, yes, relatively flat from Q2 to Q3, and even from a year ago, some slight declines, but nowhere near as deep as the 43% improvement in genome COGS that we have seen year-over-year. But we think we still have hundreds of dollars to take out of the genome COGS over time.

Perfect. Last one on 2027. How do all these RCM efforts and the volume impact that you have seen so far impact your typical seasonality, especially earlier in the year?

Look, we are stepping into a fourth quarter, which is typically seasonally strongest. As those that follow us know, typically Q1 of any year is the seasonal low point. We certainly would expect that. And we will have more to update on the quarterly flows of 2027 once we get to that point. But Q4 is seasonally stronger than Q3, which includes the summer months for families and physicians alike.

Thank you. And this concludes the question-answer session. I will now turn it back over to Katherine for closing remarks.

Okay, great. Well, thank you, everyone. We appreciate all of the great questions today and look forward to catching up with you very soon. Have a good night.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.